Handbook of Safeguarding Global Financial Stability

Chapter 24

Valuation Effects, Capital Flows and International Adjustment

C. Tille

Graduate Institute of International and Development Studies and CEPR, Genève, Switzerland

Outline

Introduction

Financial Globalization and Valuation Effects

Stock and Flows in External Accounts

The Drivers of Net Foreign Assets

Yield and Return Differentials

International Portfolio Choice and Adjustment in Theory

Modeling Financial Integration

Portfolio Choice and Capital Flows

Valuation Gains and External Adjustment

Interpretation of the External Accounts

Concluding Remarks

Glossary

Further Reading

Introduction

Financial globalization has been one of the major developments in the world economy since the mid-1990s. While capital had been flowing across borders well ...